The Italian Competition Authority fines eight ready-mix concrete manufacturers for two cartels and applies its new fining guidelines (Concrete Case)

The Italian Competition Authority fines eight ready-mix concrete manufacturers for two cartels and applies its new fining guidelines (Concrete Case)

di Giovanni Scoccini e Francesco Bruno, pubblicato in Concurrences

On 25 March 2015, the Italian Competition Authority (the “ICA”) fined eight ready-mix concrete manufacturers. The ICA imposed penalties of more than EUR12.5 million as a result of establishing price fixing and market allocation in the Friuli Venezia Giulia (hereinafter “FVG”) region.

The investigation was opened on 17 December 2013, following a leniency application made by the firm Calcestruzzi SpA, which admitted to the existence of two cartels among concrete manufacturers in FVG:

1) The first cartel was spread across the provinces of Udine, Pordenone, Gorizia and Treviso. It lasted from April 2010 to January 2014.[1] The firms involved were General Beton Triveneta SpA, La Nuova Calcestruzzi Srl, Calcestruzzi Zillo SpA, Friulana Calcestruzzi SpA, SuperBeton SpA, Cobeton Srl and Calcestruzzi SpA;

2) The second cartel was found in the province of Trieste. It lasted from June 2011 to June 2013. The firms involved were Calcestruzzi SpA, Concrete Nord Est Srl and Calcestruzzi Trieste Nord Est Srl (Group Calcestruzzi Zillo).

Intermodale Srl, a consulting firm, was also fined, as it played a crucial role in the functioning of the agreements.

In addition, the ICA is currently investigating a similar cartel that supposedly took place in the Veneto region. The decision is expected to be published by 29 May 2015.

According to the ICA’s decision , the two cartels caused a significant restriction in the concrete markets. During the infringement period, prices increased by 8-17 %, while the medium national increase was only 4 %. The market allocation and price-fixing allowed the firms to undermine the effects of a reduction in demand caused by the economic crisis.

It is interesting to analyse (i) the origin of the cartels; and (ii) its functioning.

(i) The economic turmoil has particularly affected the North-Est of Italy, one of the richest and more productive areas of the country. The reduction on the demand side resulted in aggressive competition among the concrete producers, while simultaneously profits decreased. In order to stop this negative trend, the major producers (80% of the market share for the first cartel, 60% of the second) decided to collude in order to avoid a competition war on clients and prices.

(ii) The cartelists organised a complex structure for the functioning of the cartels. The two agreements were managed by the consulting firm Intermodale. Under said agreements, the firms would exchange commercial information about matters such as market allocations, historical clients and recently opened or yet to be opened construction sites. Intermodale prepared summary reports which identified every firm with a code. These reports were discussed during meetings, which took place on a weekly basis in Udine and Trieste. In addition, the organisation of the cartel included the application of penalties for the internal infringers.

All the firms involved (except Nord Est Logistica Srl) have acknowledged their participation in the cartels. Nord Est Logistica Srl (“NEL”) is a company which offers road transport services and other services for construction companies. The main shareholders of the company are General Beton and Calcestruzzi Zillo (minor shareholders are Union Beton Trasporti Srl, Friulana Calcestruzzi and Nuova Calcestruzzi). NEL was investigated but the ICA did not fine it because the firm was not part of the cartels. However, this company has played an important role for the agreements. NEL collected the data about the quantities of the mix-concrete that it transported for its clients and shared this data with its shareholders. The ICA stated that thanks to the information provided by NEL, its main shareholders could check if the other cartelists that used the NEL’s transport services respected what concerted during the meetings.

According to the defences raised by the participants, the coordination was forced by the economic crisis and by the aggressive competition, which were causing huge losses. The firms also argued that it was quite common to deviate from the agreements and that disputes would regularly arise during the meetings. The ICA, in its reply to these defences, stated that notwithstanding these disputes, the cartel in Udine lasted for almost 4 years and the Trieste cartel for more than two years. This resulted in a reduction of losses, as the parties recognised.

The firms also argued for a mitigation of the fines because of the limited effects of the unlawful agreements. The cartelists reasoned that the geographic area was relatively small and the price increase could not be compared with the rest of the country. The ICA replied by arguing that the behaviour amounted to a restriction by object regardless of this and that the price increase had been much higher than in the rest of Italy. Furthermore, the ICA explained that the geographic limitation of the cartels was due to the particular characteristics of the product, which has to be used in a short period after its preparation.

The firms Zillo, Concrete Nord Est Srl and SuperBeton contested the finding of two cartels (Udine and Trieste). Rather, they argued that there was only one, because in their opinion the members of the two agreements were the same, the cartels concerned the same product, and in both cases Intermodale assisted with the coordination. The ICA rejected this argument as well. The Italian Authority stated that there were two different “Boards of organisation” in the Udine and Trieste cartels respectively, and the members were not exactly identical. In fact, Concrete did not participate in Udine’s cartel. In a similar way, Friulana, Cobeton and SuperBeton did not participate in the Trieste cartel. In addition, even the cartels’ respective durations were different, as indicated above.

It is interesting to note that the Italian Competition Authority applied its new Guidelines[2] on setting fines, which were approved on 22 October 2014, in order to employ an objective methodology to calculate fines. According to these Guidelines, the basic amount is calculated on the basis of the total sales of the product during the final year of the infringement within the geographic area considered. The Guidelines state that in the case of secret agreements aimed to fix prices and allocate markets, the percentage of the sales used to obtain the basic amount of the fine cannot be lower than 15 % or higher than 30%. The ICA believes that secret agreements on price-fixing, restriction of production and market allocation represent one of the most serious anticompetitive types of conduct. In its decision, the ICA decided to apply the 15% mark of the total sales (multiplied by the years of duration) to calculate the fines.

The new Guidelines have the potential to work as a deterrent for market operators. By the end of May 2015 we will see if the same ratio will also be applied in the investigation into the similar suspected cartel of ready-mix concrete manufacturers occurred in Veneto region.

[1] It lasted from June 2011 to June 2013 for Calcestruzzi SpA

[2] Available on the ICA’s website,

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